Of all political groups, government employee unions have perhaps the greatest interest in growing government and staving off any political reforms. Many Republicans are unaware of this truth, but now it is New York Democratic governor Andrew Cuomo who is finding this out first-hand as he tries to restructure the awful mess that is the state's employee pension liability system. There are several reforms the greedy union bosses are fighting but the one they're most against is moving employees away from a defined benefit pension plan to the 401(k) plans that most Americans have. For the union 1 percenters, that is outrageous:
The AFL-CIO is running ads blasting the governor's plan to "cut pensions by 40%." He should instead "make the big corporations and Wall Street pay their fair share." A couple of footnotes are in order. First, Mr. Cuomo's pension reform wouldn't affect current workers or retirees. Future workers would receive annuities about 16% smaller than what recently hired workers will get, though they would have to wait three more years to retire. New hires would also have to pay twice as much to their pensions -- about 6% of their pay -- but they would have the option of enrolling in a portable 401(k)-style plan in which they could select their own contribution rates.
The unions don't want to create another pension tier for future employees -- the state's sixth tier -- because it could sow more division among their ranks. But what really has them up in arms is the defined-contribution plan. Even though these plans would be voluntary, the unions fear that the governor's proposal lays the groundwork for making the 401(k)-style pensions mandatory down the line. Defined-contribution plans also make it harder for unions to retain members. The promise of a generous pension after 25 years of service is the only thing tying many public workers to their jobs.
Trouble is, taxpayers are the ones getting hit with the bill. In New York City, for instance, taxpayers are contributing $8 billion a year to worker pension funds, up from $1.3 billion a decade ago. Mayor Michael Bloomberg published an op-ed in the New York Daily News on Thursday urging state lawmakers to approve the governor's plan in order to save the city from more tax hikes and service cuts.
Even though 66% of New Yorkers support the governor's plan, according to a new Siena College poll, the union airstrikes have lawmakers running for cover. The governor recently suggested that he'd be open to goosing benefits when pension fund returns improve, and lawmakers are working on a watered-down bill that scraps the defined-contribution option. The governor and legislators may represent voters, but they answer to the unions.
Who knows what Cuomo will end up doing in the face of union cash but you at least have to give him credit for trying to put things in order.